Consumer spending rises in June, 2nd straight gain

Consumer spending up in June for 2nd straight month, personal incomes drop more than expected

By Christopher S. Rugaber, AP Economics Writer

WASHINGTON (AP) — Consumers opened their wallets and pocketbooks a bit more in June, increasing their spending for the second straight month while saving a bit less, even as incomes fell sharply
Consumer spending is closely watched because it accounts for about 70 percent of total economic activity. The increase could provide a lift to the economy, but may be hard to sustain if incomes continue to fall.
The Commerce Department said Tuesday that consumers boosted their spending 0.4 percent in June, slightly ahead of analysts’ estimates. That comes after spending rose 0.1 percent in May.

Personal income fell 1.3 percent after rising by the same amount in May, when incomes were boosted by one-time payments from the Obama administration’s stimulus package. Economists expected personal incomes, the fuel for future spending, to fall 1 percent.

Amid the longest recession since World War II, the personal savings rate has surged as Americans seek to rebuild their nest eggs after home values and stock portfolios plummeted last year. While saving can be good in the long run, rapid increases in saving can slow the economy.